Adding Air Conditioning Worth It In Low Income Areas?
If I buy a rehab that I plan to rent out in a low income area, is the addition of air conditioning typically worth it? In this case I guess it would end up being included in the financing so the expense would not hurt that much, but is it really value added?
Does the a/c make it that much easier to find good tenants?
Does it make it easier to charge higher rent?
Does it turn into a headache due to maintenance down the road?
Thanks,
Kevin
Yes, Yes, and yes.
Tenants prefer A/C and are willing to pay more for it.
However, the majority of them NEVER change the air filters, despite reminders, provision of filters, etc. This leads to clogged coils down the line....which, of course, equals $$$
Tenants will screw up your A/C units in low income areas. I agree that the best option would be window units. You can get then cheaper and replace them easier. I keep an eye out for them at yard sales local papers and buy them year round. I store them and pull them out when needed.
Is this property always going to be a rental? Do you think it will be sold to a family that is going to occupy it down the road?
I think window units are the best option.
See what others charge in your area for similar services. The market will determine the rates.
Hmm...
I was thinking of doing that (and still plan to do so). However, how would I going about that; randomly call business in this field and ask them what are their fees/prices? Or do you know of a company that could provide such information - like a research company?
Thank you.
I think 10% is about average. 8% is a good rate.
Thank you all for your post(s). I am certainly considering your advice.
Thanks!
The 8% is off of the rents before any utilities or other expenses. The management company will usually set it up the way you want as far as what is taken care of out of the gross rents. For example I have my property managers take their 8% right off the top then pay any utilities or water bills etc. that arise then send me the balance of the funds with a statement for the month of all money collected and out going as well. Hope this helps.
Mike
You are correct to realize that fact.
Four years is a long time. What strategies can you use to get the funds at that time that you may need?
I can share how it worked for me. I took the max heloc that made sound financial sense for my risk-averse mind. In 2002 I took an 80% heloc (71K) on my home for prime-.50. I used it to put downs/closing on 4 SFH(56,126,123,84) in outlying fringe areas of DCmarket. Those 4 produce 315, 425, 375, 300 pcf plus prin paydown of Tt 325+ per mo. in 2005/2006. They are worth 130, 240, 255, 135 conserv today. History shows that 2002-2005 has been very good for appreciation. I sold my home in 1/05. My primary appreciated (DC market) so much from 2002-2005 that I still ended up with 3x what I wanted to put down on my new home.
Some benefits of a heloc can be:
1. No/low closing costs.
2. Use, pay down, pay off, use again...at your hearts content.
3. Oftentimes, interest only payments allow for good control.
4. Tax use.
Hi Bordomike, Welcome to the forum. I live just up the road from you in North Branch, though my rentals are located in Sauk Centre, Fargo-Moorhead, and Staten Island, NY.
Tell me about your townhome and the negative cashflow. Is it in a high appreciation area?
~~Sure Mike,
"I can share how it worked for me. I took the maximum heloc that made sound financial sense for my risk-averse mind. In 2002 I took an 80% heloc (71K) on my personal home for prime-.50. I used it to put downpayments/closing costs on 4 SingleFamilyHomes costing(56K,126K,123K,84K) in outlying "fringe areas" of the DC market. Those 4 (listed above) produce $315, $425, $375, $300 positive cash flow plus they have principle paydown (reduction) of Total $325.00 + per month in 2005/2006. (I think of my properties by tax years) They are worth 130K, 240K, 255K, 135K conservatively today. History shows that 2002-2005 has been very good for appreciation. I sold my primary home in 1/05. My home appreciated (DC market) so much from 2002-2005 that I still ended up with 3 times what I wanted to put down on my new home."
Hope that helps a bit. Sometimes I abbreviate my own way, and condense more info. together than I realize.
I wanted to share how it can really be worth it. However, I also wanted to point out that markets matter, timing matters, and good management/planning matters.